Thursday, 29 June 2017

Finding the money

The way in which the Tories and the DUP have cobbled together a deal to keep May in power tells us a lot about the reality of government finances.  The cost of this isn’t just the £1 billion extra outside Barnett for Northern Ireland, it’s also the cost of abandoning badly thought through manifesto commitments on pensions, social care, and the winter fuel allowance.  (As a former Tory Chair put it, had the Tories actually put before the electorate the policies which they’ve now decided to implement, they might well have won the increased majority which May was seeking.)  The total expenditure over and above that implied by the manifesto is probably in excess of £20 billion.  Luckily for the Tories, they didn’t think it necessary to provide costings for their manifesto; had they done so, it would now be obvious just how many billions adrift they are.
That money has to come from somewhere, of course, and some of the discussion has talked about this being “taxpayers’ money”.  That implies that it’s coming from taxes one way or another, but that isn’t necessarily so; it could also come from borrowing.  Or the government could simply create more money.  In any event, finding a few extra billions isn’t a problem, because there really is a magic money tree (or even two) and the ease with which the government has agreed to find the money underlines that fact.  The obsession with reducing the debt is, and always has been, a smokescreen with which to hide an ideological commitment to a smaller state and an increase in wealth disparity.
The amazing thing is that, despite demonstrating time after time that the deficit isn’t a problem, the Tories can still make the media and other parties dance to their tune, and demand that they say how they will reduce the debt which the Tories are busy creating.  It’s a reflection on the quality of journalism today that they are getting away with it.

Wednesday, 28 June 2017

Punishment and excuses

The Brexit Secretary came up with a new formulation of ‘no deal is better than a bad deal’ this week when he said that no deal would be better than a ‘punishment deal’.  It has a nice ring to it in terms of rhetoric, but it’s every bit as silly as the previous formulation.  And it glosses over the fact that there will be two agreements, not one. 
As far as the second deal, the trade deal, is concerned, we already know that the worst possible outcome is to revert to WTO rules, and that outcome is the inevitable result of no deal.  There is simply no means by which the EU27 can offer worse terms than that; so there is no way of ‘punishing’ anyone.  And we already know that no deal which leaves the UK outside the single market (an inevitable consequence of rejecting freedom of movement and the jurisdiction of the ECJ) can never be as good as membership of the EU.  So any agreement will be better than WTO terms but worse than current terms; ‘no deal’ cannot be better than even the worst negotiated deal.
But prior to that trade deal, the first deal – and the one that has to be largely agreed as a precursor to any trade deal – is about the terms of exit.  There will be many elements to this, but the only one that offers any scope for meting out anything resembling ‘punishment’ is the agreement over the amount to be paid by the UK to the EU.  This has regularly – and wrongly – been presented as though it were some sort of ‘exit bill’.  It is not; it is a calculation of the amount of money which is required to be paid to meet the UK’s obligations under agreements to which it is already party. 
There is certainly plenty of scope for a difference of opinion over which elements should be included and the number of pounds to be attached to each element, and if the EU27 really wanted to punish the UK for daring to leave, this is where they have the most scope for doing so.  The Institute of Economic Affairs has suggested that the total could be as low as £26billion; rumours from within the EU suggest a number anywhere up to £100billion. 
Whether it would be in the EU’s interests to demand an excessive sum is another question entirely; getting something from the UK is obviously better than seeing the UK walk away without paying anything.  And it’s ‘true’ that the UK could simply walk away and pay nothing; but it isn’t the cost-free option as which some seem to see it.  In the first place, seeking a trade deal on better terms than the WTO terms with the EU immediately after walking away from previously agreed commitments isn’t exactly the best way to get them in the right frame of mind for the negotiation.  And in the second place, it would seriously harm the UK’s reputation and ability to make agreements with anyone else.  Who, after all, would want to negotiate a deal on anything with a country which thinks it can tear up a contract at will and walk away with no consequences?  Who would trust such a country?
So, on the specific issue of the amount to be paid, both sides have a clear interest in coming to an agreement  Threats to the contrary by one side will be more of an obstacle than an aid in reaching that agreement.  I can’t believe that David Davis doesn’t understand all this; his abject capitulation over his previous suggestion that the scheduling of talks would be the ‘row of the summer’ certainly suggests that he has a better grasp of reality than his rhetoric indicates.  So why go to so much trouble, repeatedly, to make things harder for himself by trying to raise the stakes?  I wonder if he really wants a deal at the end of the day or not; perhaps he’s just setting the scene to be able to blame those nasty foreigners for the outcome that he really wants – an excuse to walk away.

Tuesday, 27 June 2017

Who's out of step here?

The initial position taken by the UK Government over the future rights of EU citizens does not bode well for the Brexit negotiating strategy.  Denying rights to people who have not yet arrived in the UK at the point of exiting the EU is one thing, but retrospectively removing rights from people who are already here is another thing entirely.  It's a strange logic which leads the UK Government to believe that removing rights from EU citizens is anything resembling the ‘fair and reasonable offer’ as which they are describing it, especially when the EU27 have already stated that they want to protect all those rights currently enjoyed by UK citizens elsewhere in the EU.  Given the importance of getting this issue right before trade talks can even start, it seems a very curious way of trying to earn a bit of friendship.
Craig Murray describes it well as a bit of ‘pointless cruelty’, and it has already emerged that it will require even those EU citizens who have applied for and obtained residency rights to apply again for a new and lesser status.  What on earth is the thinking behind this which enables apparently intelligent people to conclude that there is anything fair or reasonable about this?
It strikes me that part of the issue here might well be very differing conceptions about citizen’s rights.  It is already true that EU citizens living in the UK have more rights, in terms of bringing family to join them for instance, than do UK citizens.  And it is revealing that in drawing attention to that apparent unfairness, the implicit assumption is that EU citizens’ rights should be curtailed rather than widening the rights of UK citizens.  Indeed, in more general terms, the government seems to have a real problem in acknowledging the whole concept of people having ‘rights’ at all – it’s a very un-British concept.  Although the term ‘citizen’ is more widely used than it used to be, the underlying reality is that people in the UK are subjects with obligations, rather than citizens with rights.  They are two very different perspectives.
If we start with that implicit assumption about subjects with obligations, it becomes a lot easier to understand how the ‘offer’ which the government has made might indeed appear to be a ‘fair and reasonable’ one; but it was never going to appear that way to anyone who starts from the other perspective.  It seems typical of May and her team that they have no real conception or understanding of the gulf between the two perspectives, and therefore are making no real effort to bridge it.  Understanding the thinking of other parties is key to any successful negotiation but on this issue, as on so many others, the UK Government seems determined to insist that it’s everyone else who is out of step.

Friday, 9 June 2017

An initial reaction

At one level, not a lot has changed; it is clear that we will still have a Tory Government, which will be able to rely on the members of the DUP for support on most issues, even without a formal agreement or coalition.  Yet at another level a great deal has changed; a Prime Minister who chose to make the election all about how strong she was and how she needed to strengthen her hand has become a Prime Minister who has demonstrated how weak she is and has weakened her own hand.  It was a spectacular miscalculation.
In terms of the immediate problem in hand, it does not change the fact of the Brexit vote; there is still no majority in parliament for revisiting the decision or allowing a second vote when the details are clear.  What has changed is that there is no longer a majority in the House of Commons for a form of Brexit which involves leaving both the single market and the Customs Union.  Even the DUP, as I understand their position, prefer continued membership of both whilst being outside the EU itself; and there are some members on the Tory benches – even some strong Brexiteers - who would also prefer that scenario, for a period at least, and who are rather less committed to the hard-line anti-immigrant rhetoric of people like May.
However, a preference for that outcome isn’t the same as a willingness to support the concessions which will be necessary to achieve it.  Whilst membership of the European Economic Area can offer many of the economic benefits of membership of the EU, it would come at a price, in terms of acceptance of EU rules, acceptance of the authority of the ECJ, annual payments into the EU, and a willingness to accept freedom of movement.  Without compromise on at least some of those, it’s hard to see how the parliamentary majority can be translated into a deal.
I find it hard to see how even May, with her recently well-demonstrated ability to stand on her head whilst arguing that she hasn’t moved, can make any of the necessary compromises – replacing her is probably the first prerequisite for a change in the UK’s position to a more pragmatic stance.  The good news is that her party will probably see to that, even if not immediately.  The second prerequisite is probably for the Labour Party to drop its insistence on an end to free movement and be a bit more open to compromise.  At the moment, I’m not sure how likely that is; they seem to have hooked themselves on an anti-immigration peg in the belief that it was electorally necessary.
Thinking around the alternative futures for Wales, I remain convinced that reversing Brexit is the best option, and I remain disappointed that so few are making that case.  But continued membership of the single market and Customs Union through the EEA would at least offer a fast-track return to the EU at some future date – either for the UK as a whole or for an independent Wales (and Scotland).  I can at least see a route forward for an independent Wales in that context, which I could not see in the context of the type of Brexit being pursued by May.  However, yesterday’s result was not enough to make me feel optimistic about such an outcome – just a little less pessimistic.

Thursday, 8 June 2017

Appearing tough

There are three things which the Tories can normally be relied upon to do when a response is needed to any question of ‘Laura Norder’.  The first is to blame someone or something else, the second is to restrict citizens’ rights, and the third is to promise tougher penalties.  And, sure enough, the Prime Minister has rehearsed all three over the past day or two in response to the atrocities in Manchester and London.  And they’re all as irrelevant in this case as usual.
The implied blame in this case is a combination of incorporating human rights legislation into UK law, and making the UK subject to ‘foreign’ courts, which actually dare to uphold the relevant legislation.  It’s a convenient scapegoat, but it is being used to divert attention from the fact that, as Home Secretary, Theresa May herself failed to protect the UK using the already adequate powers which she had.  And part of the reason for that failure brings us to the second strand of her response.
Taking away, or reducing, citizens’ rights is always their preferred option.  In general, it often seems as though they’d really prefer it if citizens didn’t have any rights at all, and just did whatever they were told – the surprising thing is that so many people seem to accept that it’s a good idea, but then, they probably are assuming that it will only affect ‘someone else’.  But in many ways, tearing up our protections against over-intrusive security services is a way of making up for a lack of resources within those services.  And that’s what ties the first and the second strand together – the problem isn’t that someone else is to blame, nor that human rights prevent the proper operation of the security services, it is that the resources available to those services have been consciously and deliberately reduced over recent years by a Home Secretary whose priority was financial.  And let’s just remind ourselves who that Home Secretary was.
In the case of the third strand, the response is just plain silly.  The argument is that knowing that there will be longer jail sentences for perpetrators of crime makes them less likely to commit crime.  I can see how that might conceivably work in the case of, say, burglary, but it depends on the idea that the burglar will sit down and do a cost-benefit analysis of the potential gain from the burglary and the potential pain of the jail term.  That seems highly unlikely to me; insofar as our hypothetical burglar does any weighing of the pros and cons in advance, the factor most likely to weigh in his or her mind is the probability of getting caught.  (And that, of course, brings us straight back to the question of the level of police resources…)  However, in the case of our would-be terrorist attacker, he or she has already assumed that the outcome of the attack will be his or her death; either through use of a suicide bomb or else by police action.  The idea that knowing that they face a sentence of 30 years rather than 20, say, if they survive is hardly likely to be much of a deterrent.  Could it be a deterrent to those aiding and abetting the actual attackers?  That also seems unlikely to me; martyrdom is a part of their belief system, and prison is just another form of martyrdom.
I can’t believe that May actually believes any of what she says on these points; it looks more like a pitch to persuade people that she’s being tough.  But appearing to be tough isn’t the same as actually being tough, nor as solving a very serious problem.  It might win a few votes though, which is what it’s really about.

Wednesday, 7 June 2017

The problem with Corbyn

Whatever the result of the election, there is no question that Jeremy Corbyn has had a much better election than most assumed would be the case at the outset.  Partly, this has been because he’s been given more air time to reveal the real man rather than the bogeyman of the right wing media, and partly because the pressure of an election has revealed just how flaky and incompetent his opponent is.  And he’s been able to produce a manifesto which contains a series of very popular pledges.  It’s easy to imagine how much better he might have done if the majority of his own party’s MPs hadn’t spent most of the past two years seeking to undermine and destabilise him at every turn.  They have a lot to answer for.
And that brings me to the first of my doubts about both Corbyn and Labour.  Just supposing for a moment that he pulls off the electoral surprise of the century and ends up in a position in parliament where a Labour-led government or a Labour minority government becomes a realistic possibility.  They have said that they would put forward their manifesto proposals in the Queen’s Speech and challenge the other parties to support or oppose them.  That’s a reasonable basis for proceeding, except for one thing: how certain could we be that his own party’s MPs would back him?  Challenging Plaid, the SNP, the Greens, and the Lib Dems to oppose him if they dare is one thing – but what if all those recalcitrant MPs who would prefer large chunks of the Tory manifesto to the Labour one decide not to back him?
It’s not my only doubt about him and his party.  Leaving aside the question of Trident renewal, there are a number of other issues which concern me, of which I’ll mention just two.
Whilst I think that his approach to negotiation over Brexit is more likely to result in a deal of some sort than the petulant and hostile stance of someone who seems to believe that she has an entitlement to expect everyone else to cave in, Corbyn, like May, has already ruled out continued freedom of movement.  So whilst he’s less likely to see the UK crashing out with no deal of any sort, he’s unlikely to get a deal which goes much beyond some sort of transitional arrangements.  It’s hardly inspiring – and he, like May, has already ruled out putting the final terms back to the people, regardless of the state of public opinion at the time.
And my second major reservation about Corbyn is that he seems to have an inexplicable blind spot when it comes to Wales and Scotland.  Here is a man who supports the goal of an independent and united Ireland, who supports movements for freedom and democracy across the globe, yet seems to be incapable of coming to terms with the idea that there are people in Scotland – and to a lesser extent in Wales – who want to enjoy the same type of freedom.  I really do not understand why he is so unable to grasp the parallel.

Tuesday, 6 June 2017

Losing the argument

The battering which Corbyn has taken throughout the election campaign on the question of Trident has been a sad reflection on the state of politics.  It’s an issue on which he has been utterly consistent for the whole of his political life, but seeing interviewers trying to bully him to say that he’s changed his mind when he very clearly has not done so has been a depressing exhibition of the power of the media to create and sustain the Tory narrative.  He’s handicapped, of course, by the lack of support for his viewpoint within his own party, particularly from those unions who seem to see preparing for nuclear annihilation as just an expensive job creation scheme, but refusing to change his mind, or even just pretend that he’s changed his mind to please a particular audience, is surely a sign of strength and conviction rather than the weakness as which it’s been portrayed.
The hounding of him on the issue during the Question Time non-debate left me feeling that there’s something very wrong in a country where a gung-ho willingness to incinerate millions by launching a first strike is deemed one of the most important tests of leadership.  It’s about time someone challenged the established consensus on nuclear weapons, and it’s a great pity that his own party has prevented Corbyn from doing that effectively at an election for the first time in a generation.
It also raises a question in my mind about the much-vaunted ‘British values’ which the Prime Minister keeps banging on about.  In the light of recent events, she has quite rightly condemned those who are prepared to strap on a suicide vest and go out and kill as many randomly selected civilians as they can as being something which is completely contrary to those values.  But at the same time, she tells us that being willing and ready to launch a nuclear strike which will kill millions of randomly selected civilians (as well as probably being suicidal for the UK if the target country itself possesses nuclear weapons) is a key test of support for those same values.
Now some will no doubt object to that comparison, and argue that the whole point of having nuclear weapons is never to need to use them; that the very act of possessing them acts as a deterrent.  And obviously, they can only be a deterrent if the ‘other side’ completely believes that the PM of the day will be ready and willing to use them if the UK is attacked or if he or she believes that the UK is in imminent danger of attack.  All of that is true, of course.  But my point is simply this: a Prime Minister who declares publicly and repeatedly that she is ready and willing to order the deaths of millions of civilians – men, women, and children alike – is not in a particularly good position to argue that attacking and killing civilians is somehow alien to her core values.  Of course there are differences of opinion about the circumstances in which it can be justified, but having stated that there are indeed circumstances in which it’s not only justified, but she’s willing to do it, she’s lost the argument about values and principles.  Corbyn, at least, is still in a position to argue on the basis of values and principles - May is not.
None of this can or should be taken to provide any sort of excuse or pretext for recent attacks, but ridding humanity of its propensity to resort to extreme violence isn’t a problem restricted only to ‘others’.  The UK’s continued possession of nuclear weapons is a clear and unequivocal statement of a willingness to use them, and thus is itself a provocative act.  And it’s the sort of act which tells us more about the true values of our political leaders than any amount of rhetoric ever can.

Monday, 5 June 2017

Magic Money Trees

One of the latest lines to come from the Tories has been the suggestion that Jeremy Corbyn believes that there is a ‘magic money tree’ somewhere.  This tree, they claim, is the only possible source of all the money he needs to pay for his election promises.  It’s actually a good line, and plays well to the idea that the government, like the average household, needs to raise money before it can spend it.  It’s also complete and utter nonsense.  There really is a magic money tree; it’s called quantitative easing. 
In essence, QE is a process in which the central bank creates new money out of thin air, and since QE started in 2009, the Bank of England has created some £435 billion of new money.  It has used this money to buy up government bonds, effectively repaying government debt by giving money back to those who loaned the money (the government now nominally owes the same money to the Bank – which the government also owns…) leaving those people free to decide how to re-invest the money which they’ve been repaid.  So governments can and do create money – and there’s no fixed limit on how much they can create.  Insofar as there is a practical limit, it’s the point at which all that extra money starts to cause inflation; a point which the UK has not yet reached, because of the overall weak state (whatever the government may claim) of the UK economy.
The bigger question is how that new money is used.  The idea behind the process was that the money would find its way into the ‘real’ economy and boost investment and productivity, but using it to repay debt by buying up bonds has merely put it into the hands of people who put it back into other financial products (and some of it even got loaned back to the government in new bonds).  The effect of this has been that very little of the money has actually reached the ‘real’ economy – most of it has ended up benefiting the richest 5%, according to an estimate by the campaigning group Positive-Money.  On their calculations, for every £ created by the Bank of England, around 8p has made it into the everyday economy whilst the rest has gone into the pockets of the wealthiest.
It didn’t have to be this way, though – there’s no hard and fast rule which says that newly created money can only be used to buy up government debt.  The same money could have been used to invest directly in new infrastructure – a proposal put forward by Corbyn in 2015, and described as People’s Quantitative Easing.  The idea is not without its problems, and is supported by some economists and criticised by others, but Positive-Money estimates that every £ used this way would generate around £2.80 worth of extra economic activity.  That means, of course, that a much lower level of money creation would have a much greater effect in terms of stimulating the economy.
In criticising Corbyn for believing in a magic money tree, the Tories are diverting attention from the fact that they already have one of which they are making extensive use, but are using it to benefit the few not the many.

Friday, 2 June 2017

It's what she doesn't say that matters

Yesterday, the Prime Minister told us that she believes that the UK will become more prosperous following Brexit.  In the simplistic terms in which it is stated, and treating the phrase ‘following Brexit’ as a temporal rather than a causal expression with no specific date put on the realisation of that outcome, I’d even agree.  But it’s close to being a statement of the obvious; given economic history, the trend line over the long term towards increasing prosperity is clearly an upward one.  Regardless of what politicians do or say, the long term underlying trend points in only one direction.
It’s not answering the right question, though; like almost everything which the Prime Minister prefaces with the words “I’m very clear about…”, it’s obfuscation rather than an attempt to provide clarity.  The right question is not whether the UK is likely to be more prosperous in the future than it is now; it is whether it will be more prosperous because of Brexit than it would have been if Brexit didn’t happen.  And the second question – probably of even more significance – is how that prosperity is shared.
The answer to the first is essentially unknowable over the long term.  There are too many factors to be able to predict accurately, and any predictions would be based on assumptions – essentially guesses – as to what may happen.  I tend to the view that the longer term economic scenarios (Brexit vs no Brexit) will converge; the argument was never primarily an economic one for me.  But in the short term, it seems clear to me that growth in prosperity will falter.  It may even reverse for a while, depending on the terms of any deal - with ‘no deal’ causing the biggest short term problems.  In the short term, any form of Brexit has more economic downside than upside, and the Brexiteers would have been more honest had they spelled that out from the outset.  Whether it is really a case of ‘short term pain for long term gain’ remains to be seen (they may be right, even if I’m not convinced); but it’s a more honest position than claiming we’re on the way to an immediate land of milk and honey.
The bigger question is about how any increase in prosperity will be shared, both geographically and demographically.  Some of the proposals which have emanated from the Brexit camp, such as deregulation and seeking to become some sort of tax haven, carry very clear implications that the disparity in wealth between the well-off and the less so will continue to increase.  And the suggestion that targeted regional aid should be replaced by a pot of money for which regions could bid suggests a move away from the EU policy of trying to spread wealth geographically as well.  Under such a scenario, an ‘average’ increase in prosperity for the UK is unlikely to have much impact here in Wales.
As with so much of what May says, the most important part of what she said is what she didn’t say.  Not for nothing does she avoid committing to any detail.  

Thursday, 1 June 2017

Who's threatening who?

One of the slogans which the Prime Minister and other members of her party are repeating ad nauseam is the one about no deal being better than a bad deal.  It seems to be quite popular with a particular target audience - it’s just about the only line which got her any applause in the non-debate with Corbyn a few days ago.  It’s also one of the silliest things which she’s said – so how come she’s getting away with it?
At an irrational level, I suspect that it may be down to the fact that any compromise in discussions with the EU27 may require some flexibility – for the short term at least – on the question of freedom of movement, and for those who are motivated first and foremost by a desire to keep out foreigners, the economic price of no deal may well be outweighed by the dream of eliminating immigration.  On the other hand, those who are looking more at the economic consequences may well be mindful of the ‘truth’ that it is important in any negotiation that ‘the other side’ knows that if you can’t get a satisfactory deal, then you’ll walk away.  Anyone who’s ever been involved in a commercial negotiation will understand that – it’s precisely because it has a ring of truth about it that it strikes a chord.
Context is everything though.  In a negotiation to secure an improvement on the current situation which is beneficial to both sides, it is an entirely rational position to take.  In those circumstances, if the deal on the table at the end of the day was not better than the current status quo, then walking away with no deal would be a sensible thing to do.  At that point, all existing arrangements would simply prevail, and everything would carry on with no change.  That would be the situation, for instance, if the UK were currently outside the EU seeking entry.
The problem is – and this is why it’s such a silly and simplistic attitude – that that isn’t where we are.  We’re not negotiating for an improvement on our current situation – that was never going to be a possibility.  We’re negotiating to mitigate the economic impact of a decision which we’ve already taken, and the fall back is not simply to stay with the status quo, but to walk away with no mitigation at all.  May’s mantra amounts to saying that ‘no mitigation is better than less mitigation than we want’.  It’s utter nonsense, and no wonder that the EU27 are scratching their heads in amazement.  If the negotiations fail, walking away does not simply mean that the status quo continues; quite the reverse.  Walking away doesn’t take us back to where we were before we entered the EU; it takes us somewhere entirely different.
The UK Government has, it tells us, done little or no work on scoping out what ‘no deal’ looks like, but we know that it means a reversion to WTO rules and tariffs.   We also know that it means a lengthy period during which the UK has to renegotiate hundreds of deals and treaties with other countries.  Since the rest of the EU can’t offer a worse deal than WTO terms, even if it wanted to, I suspect that the very worst deal which could emerge from any negotiations is an agreement on a transitional period during which the UK can start to deal with the incredible amount of detail which needs attention.  The attitude of May and her cabinet seems almost designed to deter the EU27 from offering even that.  Even the worst conceivable deal – agreement on nothing other than a settlement of debts and a transitional period – is always going to be better than no deal at all, but they seem determined to create an excuse for walking away with nothing.
I’m struggling to understand whether they know all this really, and are just spinning a line in the hope of winning a few votes by sounding tough, or whether they really believe what they’re saying.  Perhaps sufficient UK electors may yet be taken in, but I doubt that the EU leaders are going to be quite as gullible as the crowd in that old cowboy film.